Recently I posted:
It seems like the analysts are concerned about the cost of proppant.
From my vantage point, the cost of sand is the least thing to be
concerned about in the overall cost of the well (benefit vs cost
analysis). The cost of resin-coated proppant may be a different story,
but I still think the cost of sand is over-hyped. Just a personal
opinion.
Today,
over at SeekingAlpha an article on the rising cost of sand.
- leading producers of sand used by oil and gas explorers such as U.S. Silica, Hi-Crush Partners, and Fairmount Santrol are soaring this year even after a recent selloff, but their gains are turning into oil producers’ pain and could affect the global energy market, WSJ's Spencer Jakab writes
- some
analysts see demand for frack sand equaling or exceeding the 2014 peak
even with drilling activity far lower; Raymond James analyst Praveen
Narra estimates the amount used per foot of well depth last year was
40%-50% more than in 2014
- Tudor Pickering
analysts say a typical Permian Basin well might have cost ~$6M to drill
last year including $350K worth of sand, but that could reach $800K by
late 2017 and conceivably top $1M if providers flex their pricing
muscles
- the cost trend could hurt
projected cash flows and means drillers would need higher breakeven
prices to justify new investment, which Jakab concludes are "putting a
smile on the faces of sand company shareholders but also should cheer
people up in Riyadh and Moscow."
Mike Filloon talked about the rising cost of frack sand some time ago.
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